During the boom years of homebuying, property manager Charlie Biter used to offer new apartment tenants one or two months’ free rent as a lease enticement. Now, as rental demand continues to surge, no such offers are necessary.
“Back then, everybody was being creative to bring renters in,” said Biter, who oversees 2,000 apartment units in the Nashville area for Continental Property Management. “But now I’m not aware of any units offering concessions.”
Across the country, as more people compete for apartments in the wake of the housing collapse, the market has swung in favor of landlords. For tenants, that means saying goodbye to move-in incentives and watching rents edge higher.
About a quarter of all apartments nationwide offered some type of concession in last year’s fourth quarter. By comparison, 53 percent of apartments offered concessions in the first quarter of 2010, according to data tracker MPF Research’s latest report.
“The industry moves in cycles, and right now not a lot of apartments are available,” said Jay Parsons, an analyst at MPF Research. Until apartment construction catches up to demand, landlords will maintain their control of the market, he said.
The vacancy rate in Pittsburgh, at 2.2 percent, is among the lowest in the country, according to MPF’s fourth-quarter data from 2011. University of Pittsburgh master’s student Harrison Murphy knows the difficulty first-hand. Four years ago, he found an apartment within an hour of searching, he said. Now, not only are rentals harder to come by, but many landlords require stricter background checks.
“I have been unable to find a single place that doesn’t require a recommendation from your previous landlord, with some even asking for recommendations from teachers,” Murphy, 24, said.
In New York, too, as rental demand swells in some of the most desirable neighborhoods, rates are reaching new highs. In 2011, average rents across all apartment categories rose 8.4 percent compared with the year-ago levels, according to the Citi Habitats annual report.
In Chelsea and the East Village, average monthly rent in January for a one-bedroom apartment hit $3,218 and $2,616 respectively. Both neighborhoods have vacancy rates below 1.5 percent. Furthermore, landlord concessions in New York plunged 68 percent from 2010, according to the report.
“With high demand in the marketplace, landlords were not likely to negotiate with potential renters, and needed to do little to attract clientele to their available apartments,” said Citi Habitats President Gary Malin.
In Portland, Ore., one of the country’s tightest markets, the year-end vacancy rate was 3.1 percent, according to the Barry Apartment Report, a local data tracker.
“Nobody’s giving concessions. That’s history,” said Joe Weston of Weston Investment, which owns 3,000 apartments in the Portland area.
In April, his firm plans to raise rental rates about 5 percent. “People living in suburbia are moving to the city center,” he said. “And some of those people were foreclosed on and are now renting.”
Increasingly, real estate observers say, more people are finding themselves in situations like Chicago resident David Sundquist, who says his rent, which continues to inch up, squeezes his budget. He said most affordable apartments he finds on Craigslist ads are in unsafe neighborhoods. In addition, “It seems like the only way to get a place is to have a roommate,” said the 31-year-old commodities trader.
In the heyday of the housing market, when the country saw droves of empty apartment units, some landlords attempted to woo tenants in striking ways.
For instance, Woody McLaughlin of Nashville’s apartment association remembers one landlord offering a trip to the Bahamas to new lease-signing tenants. But now, deals offering even one free month’s rent are scarce, he said.
Todd Jackovich, a developer with Atlanta-based Stonehenge DCM, said he and other property managers use a computer program that shows how much rents can be increased based on rates at nearby apartment buildings. “Landlords are trying to set a new floor (price) on some of their products,” he said.
While the country’s single-family home construction is still recovering from the depths of the downturn, this year is expected to be an important milestone in the tide of new multifamily home construction occurring in many cities. MPF Research estimates 125,000 apartment units will be completed by year’s end, an 89 percent gain from 2011.
“That sounds like a huge increase,” MPF’s Parsons said. “But it’s really still on the low side by historic standards. (It) puts in perspective just how very, very low 2011 was.”
Waiting lists are getting longer at apartment buildings around the country, which is fueling a spike in apartment development, real estate professionals said.
Skeptical observers, such as Weston, the Portland apartment manager, worry some markets may be over-betting on construction, creating the conditions for a speculative bubble several years from now.
“The income the developers want for some of their units is too high,” Weston said. “By 2015 we’ll have a lot of apartment products, but will there be enough people?”
© Copyright 2012 USA TODAY, a division of Gannett Co. Inc., Bobby Allyn, The (Nashville) Tennesseean.